| Summary of significant accounting policies | Summary of significant accounting policies Basis of presentation The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company, these interim financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2018 and September 30, 2017 , and its results of operations for the three and nine months ended September 30, 2018 and 2017 , and cash flows for the nine months ended September 30, 2018 and 2017 . The condensed consolidated balance sheet as of December 31, 2017 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. All intercompany balances and transactions have been eliminated in consolidation. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (the “Annual Report”). Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment reporting Operating segments are components of an enterprise for which separate financial information is available that is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Utilizing these criteria, the Company manages its business on the basis of one operating segment and one reportable segment. Significant accounting policies Effective January 1, 2018, the Company adopted the requirements of Accounting Standards Update ("ASU") No. 2014-09 , Revenue from Contracts with Customers (Topic 606) ("ASC 606"). The Company made no other material changes in the application of its significant accounting policies that were disclosed in Note 2, “Summary of significant accounting policies,” to the audited consolidated financial statements as of and for the year ended December 31, 2017 included in the Annual Report. Revenue recognition Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. For the Company's retail customer transactions, a contract exists when a written purchase order is received, and control transfers at the time of shipment or the time of delivery, depending upon the specific terms of the customer arrangement. For the Company's direct-to-consumer transactions, a contract exists when an order is placed online or in-store, and control transfers at the time of delivery of merchandise to the customer. Nearly all of the Company’s transactions with its customers include a single performance obligation delivered at a point in time. The transaction price can include both fixed and variable consideration. In most cases, it is entirely comprised of variable consideration with the variability driven by expected sales discounts, markdown support, and other incentives and allowances offered to customers. These incentives may be explicit or implied by the Company's historical business practices. Generally, these commitments represent cash consideration paid to a customer and do not constitute a promised good or service. The amount of variable consideration is estimated at the time of sale based on either the expected amount or the most likely amount, depending on the nature of the variability. The Company regularly reviews and revises, when deemed necessary, its estimates of variable consideration, based on both customer-specific expectations as well as historical rates of realization. A provision for customer incentives and allowances is included on the consolidated balance sheet, net against accounts receivable. Disaggregated revenue The Company distributes product both through national and international retailers as well as direct-to-consumers through its e-commerce and e.l.f. stores channels. The marketing and consumer engagement benefits that the direct channels provide are integral to the Company’s brand and product development strategy and drive sales across channels. As such, the Company views its three primary distribution channels as components of one integrated business, as opposed to discrete revenue streams. The Company sells a variety of beauty products but does not consider them to be meaningfully different revenue streams given similarities in the nature of the products, the target consumer, and the innovation and distribution processes. The following table provides disaggregated revenue from contracts with customers by geographical market, as the nature, amount, timing and uncertainty of revenue and cash flows can differ between domestic and international customers. Three months ended September 30, Nine months ended September 30, Net sales by geographic region: 2018 2017 2018 2017 United States $ 56,666 $ 63,320 $ 171,811 $ 169,649 International 7,223 8,545 17,053 18,646 Total net sales $ 63,889 $ 71,865 $ 188,864 $ 188,295 Contract assets and liabilities The Company extends credit to retail customers based upon an evaluation of their credit quality. The majority of retail customers obtain payment terms between 30 - 60 days, and a contract asset is recognized for the related accounts receivable. Additionally, shipping terms can vary, giving rise to contract liabilities for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery occurs. As of September 30, 2018 , other than accounts receivable, the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its condensed consolidated balance sheet. Practical expedients The Company has elected to record revenue net of taxes collected from customers and exclude the amounts from the transaction price. The Company includes in revenue any taxes assessed on the Company's total gross receipts for which it has the primary responsibility to pay the tax. The Company has elected not to disclose revenues related to remaining performance obligations for partially completed or unfulfilled contracts that are expected to be fulfilled within one year as such amounts were insignificant. Recent accounting pronouncements The following table provides a brief description of recent accounting pronouncements that could have a material effect on the Company’s financial statements: Standard Description Date of expected adoption/adoption Effect on the financial statements or other significant matters Recently adopted accounting standards ASU 2014-09, Revenue from Contracts with Customers (Topic 606) The new standard replaced all existing revenue recognition standards including industry-specific guidance and significantly expanded the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date. January 1, 2018 The Company adopted ASC 606 on a modified retrospective basis, and recognized a net reduction of $0.1 million to the opening balance of retained earnings, net of tax for the cumulative effect of applying the new standard. The results for periods beginning after January 1, 2018 are presented under ASC 606, while comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard impacted net sales and accounts receivable. Net sales would have been $0.2 million and $0.8 million higher in the three and nine months ended September 30, 2018, respectively. Accounts receivable would have been $0.9 million higher under the previous standard as of September 30, 2018. ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities The standard makes targeted improvements to US GAAP, including significant revisions to an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. January 1, 2018 The Company adopted this standard in the first quarter of 2018. The standard impacted the methods used to assess and identify impairment of its investments. Additionally, the standard eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments that are measured at amortized cost on the balance sheet. The standard had no impact on the Company's consolidated financial statements. Standard Description Date of expected adoption/adoption Effect on the financial statements or other significant matters Standards that are not yet adopted ASU 2016-02, Leases (Topic 842) The standard will require lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard. It requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application. January 1, 2019 The Company expects the standard to result in a material increase in long-term assets and long-term liabilities related to operating leases currently not recorded on the balance sheet. The Company is currently completing its implementation efforts and is continuing to evaluate other possible impacts of the adoption of this standard on its consolidated financial statements and related disclosures. ASU 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40) The standard will require customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Certain implementation costs incurred during the application development stage would be deferred and capitalized (e.g., costs of integration with on-premises software, coding, configuration, customization). Other costs incurred during the preliminary project and post-implementation stages would be expensed (e.g., planning the project, training, maintenance after implementation, data conversion). The amendments in the ASU can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. January 1, 2020 The Company is currently evaluating the effect of the standard on its consolidated financial statements and related disclosures. |
